Puffs, tobacco: Luxembourg encourages parallel markets in the European Union

Unlike in France and Belgium, the question of banning disposable electronic cigarettes (puffs) has not been raised by the Luxembourg public authorities, despite the environmental and health consequences of these new nicotine products, and despite the rapid increase in the consumption of electronic cigarettes.[1]This decision could reflect Luxembourg's usual tax dumping strategy, aimed at sucking up part of cross-border consumption.

Banning puffs not on the agenda in Luxembourg

Since the 1^er January 2025, disposable electronic cigarettes are banned from sale in Belgium. In France, the public authorities having obtained the green light from the European Union for a ban on puffs, a Joint Committee (JCC) is being held on January 23 following a recent postponement linked to the motion of censure of Michel Barnier's government. Michel Lauzzana, co-rapporteur of the text, hopes for the ban to come into force on January 1^er February 2025. For their part, the Luxembourg public authorities do not plan to follow the same path as their Belgian and French neighbors. Indeed, the Ministry of Health has indicated that it is adopting "an approach of observation and analysis of measures taken abroad", in particular in order to assess "the impacts of these initiatives". Although the Luxembourg Ministry of Health does not dispute the health and environmental impact of these new nicotine products, it believes that a ban on disposable electronic cigarettes alone would have limited effectiveness, and advocates a "global approach", i.e. on all electronic cigarettes, without further details being given.

Rapid increase in electronic cigarette consumption in Luxembourg

However, the consumption of electronic cigarettes has been following a worrying trend in recent years. Indeed, between 2022 and 2023, the share of young people aged 16 to 24 reporting that they consume electronic cigarettes jumped by 15 points, while it increased by five points among 25-34 year-olds. The Grand Duchy could opportunely benefit from the ban on puffs in Belgium and France, banking on a partial transfer of cross-border workers. However, the ministry defended itself against such a strategy, indicating that it did not have precise data on a possible increase in sales of disposable electronic cigarettes following the public health policies implemented in France and Belgium.

A parallel market maintained by the tobacco industry, retailers and public authorities

Beyond these statements, Luxembourg is regularly criticized by its European neighbors for its tax dumping practices, particularly on tobacco products, which allow it to suck up a portion of tax revenues from border jurisdictions implementing tax increases, while penalizing part of the effectiveness of health policies. This policy is used by the entire tobacco sector: in 2019, the tobacco industry supplied Luxembourg with 5,287 cigarettes per capita, compared to 552 in France. In fact, this oversupply strategy serves the tobacco industry to circumvent the health policies implemented in France, by relying on cross-border trade and smuggling.

This tax dumping strategy is also used by tobacco retailers. Indeed, in 2020, an article in Le Républicain Lorrain devoted to the trial of two French people for smuggling reported that loyalty cards from Luxembourg tobacco retailers had been found on the defendants, indicating tobacco purchases of 20,000 and 129,000 euros respectively. For Gilles Roth, Luxembourg's current Minister of Finance, the active participation of Luxembourg tobacco retailers in an illicit trade activity is not an issue, considering that he "is not responsible for prosecuting offences in France" and does not want the government to give "specific instructions to national points of sale". In fact, Luxembourg government policy deliberately favours parallel markets to France or Belgium, invoking the argument of the free movement of goods within the European Union, without considering the specific nature of tobacco products. Thus, Alain Bellot, Director of the Customs Administration, detailed the government strategy in the press: "I must ensure that there remains a differential between our excise rates and those practiced in the Greater Region [France, Belgium, Germany]". This policy of tax dumping, on a strictly accounting level, is bearing fruit, since the share of cigarettes sold to non-residents is estimated at between 85 and 90%. Luxembourg, which generates tax revenue on the sale of tobacco products, is a particular winner, insofar as the health costs generated by the consumption of these products are therefore overwhelmingly borne by border countries, and in particular France. For its part, the Luxembourg Ministry of Health is seeking to minimise the health impact that this tax dumping strategy has on other countries, considering that "buying in Luxembourg does not necessarily mean that buyers smoke more, but perhaps that despite the cost of travel, these purchases allow them to make savings".[2].

©Generation Without Tobacco

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[1] Comma, Unlike Belgium and France, Luxembourg is not about to ban puffss, 01/21/2025, (accessed 01/22/2025)

[2] Land, Smuggling at the service of the Luxembourg budget, 03/15/2024, (accessed 01/22/2024)